Argentina: In a Logic of Nested Games

In December 2001, after a four-year long recession and a yearlong drain on reserves, Argentina came to grief. President de la Rua was forced to step down by fierce opposition and widespread rioting. One institutional crisis led to another; a default on a US$130 billion-plus debt was declared; the fixed exchange which had endured for a decade was wiped out; social unrest and political fragmentation flared; the fall in gross national product was calculated at 11 per cent over the year. Such a momentous collapse in a country heralded as a model of structural reforms in the 1990s begs many questions, whose answers will reverberate throughout the developing world and spill over to issues of systemic management. Trade liberalization was certainly at the core of the reforms, and at the core of social discontent. The difficulties of compliance with international trade commitments which had been taken in times of past plenty and innocence became a central concern of both public opinion and public policy-making. Because all discussions over the rate of exchange had been all but shunned from serious public discussions, disputes became deflected to discrepancies in effective rates of protection. Particularly after the recession began to bite sharply after 1998, trade policy came to be seen as a tool to mitigate macro-economic distress.